Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing.The fisherman were charged $50 on each boat they sent out for fishing.The following table shows the total pounds of fish caught per hour and the number of boats used for fishing. Table 13.2
Refer to Table 13.2.Suppose fish sells for $1 per pound.What is the socially optimal number of boats that will maximize the profit earned by the fishermen?

Question

Overfishing along the coastline of Helsking village led the government to impose a fee on the boats used for fishing.The fisherman were charged $50 on each boat they sent out for fishing.The following table shows the total pounds of fish caught per hour and the number of boats used for fishing. Table 13.2
 Refer to Table 13.2.Suppose fish sells for $1 per pound.What is the socially optimal number of boats that will maximize the profit earned by the fishermen?

Quizplus · Accepted Answer

To find the socially optimal number of boats that maximizes profit, we need to find the point where marginal cost (MC) equals marginal revenue (MR). In this case, MC is the cost of sending out an additional boat, which is the constant $50 fee per boat. MR is the additional revenue earned from catching one more pound of fish, which is equal to the selling price of $1 per pound.

Looking at the table, we can calculate the marginal revenue and marginal cost for each additional boat:

Boats    Fish (lbs/hour)    Marginal Revenue    Marginal Cost
1        10                $10                $50
2        18                $8                 $50
3        24                $6                 $50
4        28                $4                 $50
5        30                $2                 $50

As we can see, marginal revenue decreases as more boats are used, while marginal cost remains constant. The socially optimal number of boats is where MR = MC, which occurs at 3 boats. Therefore, the best choice is C.

Overfishing Along the Coastline of Helsking Village Led the Government